Table of Content

1. Meaning
2. Types of Entrepreneurship
3. Characteristics
4. Importance

Concept of Entrepreneurship
Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most
prominent example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and

capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-
taking and is an indispensable part of a nation’s capacity to succeed in an ever-
changing and more competitive global marketplace.

Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make profits.
The best example of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or innovators, and bring new
ideas in the market by replacing old with a new invention.

It can be classified into small or home business to multinational companies. In

economics, the profits that an entrepreneur makes is with a combination of land, natural
resources, labour and capital.

In a nutshell, anyone who has the will and determination to start a new company and
deals with all the risks that go with it can become an Entrepreneur.

Also Refer:  Top 8 Difference Between Businessman and Entrepreneur

What are the 4 Types of Entrepreneurship?

It is classified into the following types:

Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter,
plumber, electrician, etc. These people run or own their own business and hire family
members or local employee. For them, the profit would be able to feed their family and
not making 100 million business or taking over an industry. They fund their business by
taking small business loans or loans from friends and family.

Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the
world. They attract investors who think and encourage people who think out of the box.
The research focuses on a scalable business and experimental models, so, they hire
the best and the brightest employees. They require more venture capital to fuel and
back their project or business.

Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and
sustain by offering new and innovative products that revolve around their main products.
The change in technology, customer preferences, new competition, etc., build pressure
for large companies to create an innovative product and sell it to the new set of
customers in the new market. To cope with the rapid technological changes, the existing
organisations either buy innovation enterprises or attempt to construct the product
internally.

Social Entrepreneurship-

This type of entrepreneurship focuses on producing product and services that resolve
social needs and problems. Their only motto and goal is to work for society and not
make any profits.

Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

 Ability to take a risk- Starting any new venture involves a considerable amount of failure
risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take
risks, which is an essential part of being an entrepreneur.
 Innovation- It should be highly innovative to generate new ideas, start a company and earn
profits out of it. Change can be the launching of a new product that is new to the market or a
process that does the same thing but in a more efficient and economical way.
 Visionary and Leadership quality- To be successful, the entrepreneur should have a clear
vision of his new venture. However, to turn the idea into reality, a lot of resources and
employees are required. Here, leadership quality is paramount because leaders impart and
guide their employees towards the right path of success.
 Open-Minded- In a business, every circumstance can be an opportunity and used for the
benefit of a company. For example, Paytm recognised the gravity of demonetization and
acknowledged the need for online transactions would be more, so it utilised the situation and
expanded massively during this time.
 Flexible- An entrepreneur should be flexible and open to change according to the situation.
To be on the top, a businessperson should be equipped to embrace change in a product and
service, as and when needed.
 Know your Product-A company owner should know the product offerings and also be
aware of the latest trend in the market. It is essential to know if the available product or
service meets the demands of the current market, or whether it is time to tweak it a little.
Being able to be accountable and then alter as needed is a vital part of entrepreneurship.
Related Topics: What is Marketing Mix?

Importance of Entrepreneurship:
 Creation of Employment- Entrepreneurship generates employment. It provides an entry-
level job, required for gaining experience and training for unskilled workers.
  Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
 Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of
homeownership. Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.
 Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a
person by increasing the income. The standard of living means, increase in the consumption
of various goods and services by a household for a particular period.
 Supports research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses
finance for research and development with research institutions and universities. This
promotes research, general construction, and development in the economy.

Importance of Entrepreneurship
Entrepreneurship drives the growth and diversification of the economy
and contributes to the creation of wealth. Before we get into the
specifics of the role of entrepreneurship in economic development,
let’s briefly encapsulate its significance. Entrepreneurship’s
importance lies in the following: 

 Drives economic growth and creates new job 

 Encourages innovation by bringing new ideas, products, and
services to the market 
 Contributes to social change by developing products or services
that reduce people’s dependence on outdated technologies 
 Addresses social and economic problems by creating solutions
that meet the needs of society
 Enables competition which improves business efficiency and
lowers prices for consumers

ALSO READ: Top 10 Benefits of Entrepreneurship to Get Motivated

Role of Entrepreneurship in Economic

Development
The role of entrepreneurship in economic development has nine
salient takeaways: 

1. Raises Standard of Living

A significant role of entrepreneurship in economic development is that
it can greatly enhance the standard of living for individuals and
communities by setting up industries and creating wealth and new
positions. Entrepreneurship not only provides large-scale employment
and ways to generate income, it also has the potential to improve the
quality of individual life by developing products and services that are
affordable, safe to use, and add value to their lives. Entrepreneurship
also introduces new products and services that remove the scarcity of
essential commodities. 

2. Economic Independence
Entrepreneurship can be a path to economic independence for both
the country and the entrepreneur. It reduces the nation’s dependence
on imported goods and services and promotes self-reliance. The
manufactured goods and services can also be exported to foreign
markets, leading to expansion, self-reliance, currency inflow, and
economic independence. Similarly, entrepreneurs get complete
control over their financial future. Through their hard work and
innovation, they generate income and create wealth, allowing them to
achieve economic independence and financial security. 
3. Benefits of New Firms and Businesses
Entrepreneurs identify market needs and develop solutions through
their products and services to begin their business venture. By starting
new firms and businesses, entrepreneurs play a key role in shaping
the economy and creating a more dynamic and diverse business
landscape. Entrepreneurship also promotes innovation and
competition, leading to new and improved products and services that
contribute to economic growth and development. 

4. Creation of Jobs
Entrepreneurship is a pivotal driver of job creation. Running the
operations of new businesses and meeting the requirements of
customers results in new work opportunities. Entrepreneurship also
drives innovation and competition that encourages other
entrepreneurs and investments, creating new jobs in a wide range of
industries, from manufacturing and construction to service and
technology sectors. 

5. Encourages Capital Formation

Capital formation is the process of accumulating resources, such as
savings and investments, to fund new business ventures and support
economic growth. Entrepreneurship can encourage capital formation
by attracting investment. In addition, the creation of new businesses
and the growth of existing firms can also contribute to the
development of a more diverse and dynamic economy that
encourages capital formation and opens the door to a wide range of
investment opportunities.

6. Elimination of Poverty
Entrepreneurship has the potential to lift people out of poverty by
generating employment and stimulating economic activity.
Entrepreneurship also contributes to the development of local
economies and helps improve the overall standard of living. 

7. Community Development
Entrepreneurship promotes economic growth, provides access to
goods and services, and improves the overall standard of living. Many
entrepreneurs also make a positive impact on their communities and
improve their well-being by catering to underserved areas and
developing environment-friendly products. Their work can help build
stronger, more vibrant communities and promote social and economic
development. 

8. Optimal Use of Resources

Entrepreneurship can help identify market opportunities and allocate
resources in the most effective way possible. Entrepreneurs also play
a key role in developing innovative products and services that meet
the needs of customers while optimizing the use of available
resources.

9. Increases Gross National Product and Per Capita

Income
Entrepreneurship can play a significant role in increasing economic
growth and prosperity by increasing Gross National Product (GNP)
and Per Capita Income (PCI). GNP measures the total economic
output of a country while PCI calculates the average income per
person. The increase in GNP can lead to a rise in PCI.
Entrepreneurship can contribute to GNP by creating new businesses
and industries, which can lead to job creation, increased consumer
spending, and higher tax revenue. 

ALSO READ: How Business Models Shape Entrepreneurial Success:

A Beginner’s Guide
Enrich Your Entrepreneurial Career
through Emeritus
We hope this guide has provided you with a comprehensive
understanding of the role of entrepreneurship in economic
development. If you are looking to start or expand your business,
enhancing your skills in the field can be highly beneficial. To upgrade
your knowledge, explore these entrepreneurship courses offered by
Emeritus, taught by experts from the world’s best universities. 

Entrepreneur: What It Means to Be One and How to Get

Started
Learn about the challenges facing entrepreneurs as they start new
businesses

By 
ADAM HAYES
 

Updated May 09, 2023

Reviewed by 
AMY DRURY

Reviewed by Amy Drury

Full Bio
Amy is an ACA and the CEO and founder of OnPoint Learning, a financial
training company delivering training to financial professionals. She has nearly
two decades of experience in the financial industry and as a financial
instructor for industry professionals and individuals.
Learn about our Financial Review Board 
Fact checked by 
KATRINA MUNICHIELLO
Investopedia / Yurle Villegas

What Is an Entrepreneur?
An entrepreneur is an individual who creates a new business, bearing most of
the risks and enjoying most of the rewards. The process of setting up a
business is known as entrepreneurship.

Entrepreneurs play a key role in any economy, using the skills and initiative
necessary to anticipate needs and bring new ideas to market.
Entrepreneurship that proves to be successful in taking on the risks of
creating a startup is rewarded with profits and growth opportunities.

KEY TAKEAWAYS

 A person who undertakes the risk of starting a new business venture is

called an entrepreneur.
 An entrepreneur creates a firm to realize their idea, known as
entrepreneurship, which aggregates capital and labor in order to
produce goods or services for profit.
 Entrepreneurship is highly risky but also can be highly rewarding, as it
serves to generate economic wealth, growth, and innovation.
 Ensuring funding is key for entrepreneurs: Financing resources include
Small Business Administration loans and crowdfunding.
 The way entrepreneurs file and pay taxes will depend on how the
business is set up in terms of structure.
0 seconds of 1 minute, 38 secondsVolume 75%
 
Entrepreneur

Why Are Entrepreneurs Important?

Entrepreneurship is one of the resources economists categorize as integral to
production, the other three being land/natural resources, labor, and capital.
An entrepreneur combines the first three of these to manufacture goods or
provide services. They typically create a business plan, hire labor, acquire
resources and financing, and provide leadership and management for the
business.

Economists have never had a consistent definition of "entrepreneur" or

"entrepreneurship" (the word "entrepreneur" comes from the French
verb entreprendre, meaning "to undertake"). Though the concept of an
entrepreneur existed and was known for centuries, the classical
and neoclassical economists left entrepreneurs out of their formal models.
They assumed that perfect information would be known to fully rational
actors, leaving no room for risk-taking or discovery. It wasn't until the middle
of the 20th century that economists seriously attempted to incorporate
entrepreneurship into their models.

Three thinkers were central to the inclusion of entrepreneurs: Joseph

Schumpeter, Frank Knight, and Israel Kirzner.1 Schumpeter suggested that
entrepreneurs—not just companies—were responsible for the creation of new
things in the search for profit. Knight focused on entrepreneurs as the bearers
of uncertainty and believed they were responsible for risk premiums
in financial markets. Kirzner thought of entrepreneurship as a process that led
to the discovery of opportunities.

Fast-forward to today, entrepreneurs commonly face many obstacles when

building their companies. The three that many of them cite as the most
challenging include overcoming bureaucracy, hiring talent, and obtaining
financing.

What Are Different Types of Entrepreneurs?

Not every entrepreneur is the same and not all have the same goals. Here
are a few types of entrepreneurs:

Builder
Builders seek to create scalable businesses within a short time frame.
Builders typically pass $5 million in revenue in the first two to four years and
continue to build up until $100 million or beyond. These individuals seek to
build out a strong infrastructure by hiring the best talent and seeking the best
investors. Sometimes, they have temperamental personalities that are suited
to the fast growth they desire but may make personal and business
relationships difficult.2

Opportunist
Opportunistic entrepreneurs are optimistic individuals with the ability to pick
out financial opportunities, get in at the right time, stay on board during the
time of growth, and exit when a business hits its peak.

These types of entrepreneurs are concerned with profits and the wealth they
will build, so they are attracted to ideas where they can create residual or
renewal income. Because they are looking to find well-timed opportunities,
opportunistic entrepreneurs can be impulsive.2

Innovator
Innovators are those rare individuals that come up with a great idea or
product that no one has thought of before. Think of Thomas Edison, Steve
Jobs, and Mark Zuckerberg. These individuals worked on what they loved
and found business opportunities through their vision and ideas.

Rather than focusing on money, innovators tend to care more about the
impact that their products and services have on society. These individuals are
not the best at running a business as they are idea-generating individuals, so
they often leave the day-to-day operations to those more capable in that
respect.2

Specialist
These individuals are analytical and risk-averse. They have a strong skill set
in a specific area obtained through education or apprenticeship. A specialist
entrepreneur will build out their business through networking and referrals,
sometimes resulting in slower growth than a builder entrepreneur.2

4 Types of Entrepreneurship
As there are different types of entrepreneurs, there are also different types of
businesses they create. Below are the main different types of
entrepreneurship.

Small-business
Small business entrepreneurship refers to opening a business without turning
it into a large conglomerate or opening many chains. A single-location
restaurant, one grocery shop, or a retail shop to sell goods or services would
all be examples of small business entrepreneurship.

These people usually invest their own money and succeed if their businesses
turn a profit, which serves as their income. Sometimes, they don't have
outside investors and will only take a loan if it helps continue the business.

Scalable startup
These are companies that start with a unique idea that can be built to a large
scale—think Silicon Valley. The hopes are to innovate with a unique product
or service and continue growing the company, continuously scaling up over
time. These types of companies often require investors and large amounts of
capital to grow their idea and expand into multiple markets.

Large-company
Large company entrepreneurship is a new business division created within an
existing company. The existing company may be well placed to branch out
into other sectors or it may be positioned well to become involved in new
technology.

CEOs of these companies either foresee a new market for the company or
individuals within the company generate ideas that they bring to senior
management to start the process and development.

Social entrepreneurship
The goal of social entrepreneurship is to create a benefit to society and
humankind. This form of business focuses on helping communities or the
environment through their products and services. They are not driven by
profits but rather by helping the world around them.

How to Become an Entrepreneur

After retiring her professional dancing shoes, Judi Sheppard Missett became
an entrepreneur by teaching a dance class in order to earn some extra cash.
But she soon learned that women who came to her studio were less
interested in learning precise steps than they were in losing weight and toning
up. Sheppard Missett then trained instructors to teach her routines to the
masses, and Jazzercise was born. Soon, a franchise deal followed and
today, the company has more than 8,300 locations worldwide.3

Following an ice cream–making correspondence course, two entrepreneurs,

Jerry Greenfield and Ben Cohen, paired $8,000 in savings with a $4,000
loan, leased a Burlington, Vt., gas station, and purchased equipment to
create uniquely flavored ice cream for the local market.4 Today, Ben &
Jerry’s hauls in millions in annual revenue.

In the 21st century, the example of Internet giants like Alphabet, the parent
company to Google (GOOG), and Meta (META; formerly Facebook), both of
which have made their founders wildly wealthy, have been clear examples of
the lasting impact of entrepreneurs on society.
Unlike traditional professions, where there is often a defined path to follow,
the road to entrepreneurship is mystifying to most. What works for one
entrepreneur might not work for the next and vice versa. That said, there are
seven general steps that many successful entrepreneurs have followed:

Ensure financial stability

This first step is not a strict requirement but is definitely recommended. While
entrepreneurs have built successful businesses while being less than
financially flush, starting out with an adequate cash supply and stable
ongoing funding is a great foundation.

This increases an entrepreneur's personal financial runway and gives them

more time to work on building a successful business, rather than worrying
about having to keep raising money or paying back short-term loans.

Build a diverse skill set

Once a person has strong finances, it is important to build a diverse set of
skills and then apply those skills in the real world. The beauty of step two is it
can be done concurrently with step one.

Building a skill set can be achieved through learning and trying new tasks in

real-world settings. For example, if an aspiring entrepreneur has a
background in finance, they can move into a sales role at their existing
company to learn the soft skills necessary to be successful. Once a diverse
skill set is built, it gives an entrepreneur a toolkit that they can rely on when
they are faced with the inevitability of tough situations.

Much has been discussed about whether going to college is necessary to

become a successful entrepreneur. Many well-known entrepreneurs are
famous for having dropped out of college: Steve Jobs, Mark Zuckerberg, and
Larry Ellison, to name a few.

Though going to college isn't necessary to build a successful business, it can

teach young individuals a lot about the world in many other ways. And these
famous college dropouts are the exception rather than the norm. College may
not be for everyone and the choice is personal, but it is something to think
about, especially with the high price tag of a college education in the U.S.

Consume content across multiple channels

As important as developing a diverse skill set is, the need to consume a
diverse array of information and knowledge-building materials is equally so.
This content can be in the form of podcasts, books, articles, or lectures. The
important thing is that the content, no matter the channel, should be varied in
what it covers. Aspiring entrepreneurs should always familiarize themselves
with the world around them so they can look at industries with a fresh
perspective, giving them the ability to build a business around a
specific sector.

Identify a problem to solve

Through the consumption of content across multiple channels, an aspiring
entrepreneur is able to identify various problems in need of solutions. One
business adage dictates that a company's product or service needs to solve a
specific pain point, either for another business or for a consumer group.
Through the identification of a problem, an aspiring entrepreneur is able to
build a business around solving that problem.

It is important to combine steps three and four so it is possible to identify a

problem to solve by looking at various industries as an outsider. This often
provides an aspiring entrepreneur with the ability to see a problem others
might not.

Solve That Problem

Successful startups solve a specific pain point for other companies or for the
public. This is known as "adding value within the problem." Only through
adding value to a specific problem or pain point does an entrepreneur
become successful.

Say, for example, you identify that the process for making a dental
appointment is complicated for patients, and dentists are losing customers as
a result. The value could be to build an online appointment system that
makes it easier to book appointments.

Network like crazy

Most entrepreneurs can't do it alone. The business world is a cutthroat one
and getting any help you can will likely help and reduce the time it takes to
achieve a successful business. Networking is critical for any new
entrepreneur. Meeting the right people who can introduce you to contacts in
your industry, such as the right suppliers, financiers, and even mentors, can
mean the difference between success and failure.

Attending conferences, emailing and calling people in the industry, speaking

to your cousin's friend's brother who is in a similar business, will help you get
out into the world and discover people who can guide you. Once you have
your foot in the door with the right people, conducting a business becomes
easier.

Lead by example
Every entrepreneur needs to be a leader within their company. Simply doing
the day-to-day requirements will not lead to success. A leader needs to work
hard, motivate, and inspire their employees to reach their best potential,
which will lead to the success of the company.

Look at some of the greatest and most successful companies; all of them
have had great leaders. Apple and Steve Jobs, Bill Gates and Microsoft, Bob
Iger and Disney, are just a few examples. Study these people and read their
books to see how to be a great leader and become the leader that your
employees can follow by the example you set.

Entrepreneurship Financing
Given the riskiness of a new venture, the acquisition of capital funding is
particularly challenging, and many entrepreneurs deal with it via
bootstrapping: financing a business using methods such as using their own
money, providing sweat equity to reduce labor costs, minimizing inventory,
and factoring receivables.

While some entrepreneurs are lone players struggling to get small

businesses off the ground on a shoestring, others take on partners armed
with greater access to capital and other resources. In these situations, new
firms may acquire financing from venture capitalists, angel investors, hedge
funds, crowdfunding, or through more traditional sources such as bank loans.

Resources for entrepreneurs

There are a variety of financing resources for entrepreneurs starting their own
businesses. Obtaining a small business loan through the Small Business
Administration (SBA) can help entrepreneurs get the business off the ground
with affordable loans. Here, the SBA helps connect businesses to loan
providers.

If entrepreneurs are willing to give up a piece of equity in their business, then

they may find financing in the form of angel investors and venture capitalists.
These types of investors also provide guidance, mentorship, and connections
in addition to capital.
Crowdfunding has also become a popular way for entrepreneurs to raise
capital, particularly through Kickstarter or Indiegogo. In this way, an
entrepreneur creates a page for their product and a monetary goal to reach
while promising certain givebacks to those who donate, such as products or
experiences.

Bootstrapping for entrepreneurs

Bootstrapping refers to building a company solely from your savings as an
entrepreneur as well as from the initial sales made from your business. This
is a difficult process as all the financial risk is placed on the entrepreneur and
there is little room for error. If the business fails, the entrepreneur also may
lose all of their life savings.

The advantage of bootstrapping is that an entrepreneur can run the business

with their own vision and no outside interference or investors demanding
quick profits. That being said, sometimes having an outsider's assistance can
help a business rather than hurt it. Many companies have succeeded with a
bootstrapping strategy, but it is a difficult path.

Small business vs. entrepreneurship

A small business and entrepreneurship have a lot in common but they are
different. A small business is a company—usually, a sole-proprietorship or
partnership—that is not a medium-sized or large-sized business, operates
locally, and does not have access to a vast amount of resources or capital.

Entrepreneurship is when an individual who has an idea acts on that idea,

usually to disrupt the current market with a new product or service.
Entrepreneurship usually starts as a small business but the long-term vision
is much greater, to seek high profits and capture market share with an
innovative new idea.

How entrepreneurs make money

Entrepreneurs seek to generate revenues that are greater than costs.
Increasing revenues is the goal and that can be achieved through marketing,
word-of-mouth, and networking. Keeping costs low is also critical as it results
in higher profit margins. This can be achieved through efficient operations
and eventually economies of scale.

How do taxes work for entrepreneurs?

The taxes you will pay as an entrepreneur will depend on how you structure
your business.
Sole proprietorship: A business set up this way is an extension of the
individual. Business income and expenses are filed on Schedule C on your
U.S. personal tax return and you are taxed at your individual tax rate.5

Partnership: For tax purposes, a partnership functions the same way as a

sole proprietorship in the U.S., with the only difference being that income and
expenses are split amongst the partners.

 
Entrepreneurs operating as sole proprietors can deduct any legitimate
business expenses from their income to lower their tax bill. This includes
expenses such as their home office and utilities, mileage for business travel,
advertising, and travel expenses.6

C-corporation: A C-corporation is a separate legal entity and has separate

taxes filed with the IRS from the entrepreneur. The business income will be
taxed at the corporate tax rate rather than the personal income tax rate.7

Limited liability company (LLC) or S-corporation: These two options are

taxed in the same manner as a C-corporation but usually at lower amounts.8

7 Characteristics of Entrepreneurs
What else do entrepreneurial success stories have in common? They
invariably involve industrious people diving into things they’re naturally
passionate about.

Giving credence to the adage, “find a way to get paid for the job you’d do for
free,” passion is arguably the most important attribute entrepreneurs must
have, and every edge helps.

While the prospect of becoming your own boss and raking in a fortune is
alluring to entrepreneurial dreamers, the possible downside to hanging out
one’s own shingle is vast. Income isn’t guaranteed, employer-sponsored
benefits go by the wayside, and when your business loses money, your
personal assets can take a hit; it's not a corporation’s bottom line. But
adhering to a few tried and true principles can go a long way in diffusing risk.
The following are a few characteristics required to be a successful
entrepreneur.
1. Versatility
When starting out, it’s essential to personally handle sales and other
customer interactions whenever possible. Direct client contact is the clearest
path to obtaining honest feedback about what the target market likes and
what you could be doing better. If it’s not always practical to be the sole
customer interface, entrepreneurs should train employees to invite customer
comments as a matter of course. Not only does this make customers feel
empowered, but happier clients are more likely to recommend businesses to
others.

Personally answering phones is one of the most significant competitive edges

home-based entrepreneurs hold over their larger competitors. In a time of
high-tech backlash, where customers are frustrated with automated
responses and touch-tone menus, hearing a human voice is one surefire way
to entice new customers and make existing ones feel appreciated—an
important fact, given that a significant percentage of business is generated
from repeat customers.

Paradoxically, while customers value high-touch telephone access, they also

expect a highly polished website. Even if your business isn’t in a high-tech
industry, entrepreneurs still must exploit internet technology to get their
message across. A startup garage-based business can have a superior
website to an established company valued at $100 million. Just make sure a
live human being is on the other end of the phone number listed.

2. Flexibility
Few successful business owners find perfect formulas straight out of the
gate. On the contrary: ideas must morph over time. Whether tweaking
product design or altering food items on a menu, finding the perfect sweet
spot takes trial and error.

Former Starbucks Chair and CEO Howard Schultz initially thought playing
Italian opera music over store speakers would accentuate the Italian
coffeehouse experience he was attempting to replicate. But customers saw
things differently and didn’t seem to like arias with their espressos. As a
result, Schultz jettisoned the opera and introduced comfortable chairs
instead.

3. Money savviness
At the heart of any successful new business, is steady cash flow, which is
essential for purchasing inventory, paying rent, maintaining equipment, and
promoting the business. The key to staying in the black is rigorous, regular
cash flow management. And since most new businesses don’t make a profit
within the first year, by setting money aside for this contingency,
entrepreneurs can help mitigate the risk of falling short of funds. Related to
this, it’s essential to keep personal and business costs separate, and never
dip into business funds to cover the costs of daily living.

Of course, it’s important to pay yourself a realistic salary that allows you to
cover essentials, but not much more—especially where investors are
involved. Of course, such sacrifices can strain relationships with loved ones
who may need to adjust to lower standards of living and endure worry over
risking family assets. For this reason, entrepreneurs should communicate
these issues well ahead of time, and make sure significant loved ones are on
board.

4. Resiliency
Running your own business is extremely difficult, especially getting one
started from scratch. It requires a lot of time, dedication, and often failure. A
successful entrepreneur must show resilience to all the difficulties on the road
ahead. Whenever they meet with failure or rejection they must keep pushing
forward.

Starting your business is a learning process and any learning process comes
with a learning curve, which can be frustrating, especially when money is on
the line. It's important never to give up through the difficult times if you want
to succeed.

5. Focus
Similar to resilience, a successful entrepreneur must stay focused and
eliminate the noise and doubts that come with running a business. Becoming
sidetracked, not believing in your instincts and ideas, and losing sight of the
end goal is a recipe for failure. A successful entrepreneur must always
remember why they started the business and remain on course to see it
through.

6. Business smarts
Knowing how to manage money and understanding financial statements are
critical for anyone running their own business. Knowing your revenues, your
costs, and how to increase or decrease them, respectively, is important.
Making sure you don't burn through cash will allow you to keep the business
alive.
Implementing a sound business strategy, knowing your target market, your
competitors, and your strengths and weaknesses will allow you to maneuver
the difficult landscape of running your business.

7. Communication skills
Successful communication is important in almost every facet of life,
regardless of what you do. It is also of the utmost importance in running a
business. From conveying your ideas and strategies to potential investors to
sharing your business plan with your employees and negotiating contracts
with suppliers—all require successful communication.

Entrepreneurship in Economics
In economist-speak, an entrepreneur acts as a coordinating agent in
a capitalist economy. This coordination takes the form of resources being
diverted toward new potential profit opportunities. The entrepreneur moves
various resources, both tangible and intangible, promoting capital formation.

In a market full of uncertainty, it is the entrepreneur who can actually help

clear up uncertainty, as they make judgments or assume risk. To the extent
that capitalism is a dynamic profit-and-loss system, entrepreneurs drive
efficient discovery and consistently reveal knowledge.

Established firms face increased competition and challenges from

entrepreneurs, which often spurs them toward research and development
efforts as well. In technical economic terms, the entrepreneur disrupts the
course toward steady-state equilibrium.

In 2022, there were 33.2 million small businesses in the United States.9
How entrepreneurship helps economies
Nurturing entrepreneurship can have a positive impact on an economy and
society in several ways. For starters, entrepreneurs create new businesses.
They invent goods and services, resulting in employment, and often create a
ripple effect, resulting in more and more development. For example, after a
few information technology companies began in India in the 1990s,
businesses in associated industries, like call center operations and hardware
providers, began to develop too, offering support services and products.

Entrepreneurs add to the gross national income. Existing businesses may

remain confined to their markets and eventually hit an income ceiling. But
new products or technologies create new markets and new wealth.
Additionally, increased employment and higher earnings contribute to a
nation’s tax base, enabling greater government spending on public projects.

Entrepreneurs create social change. They break tradition with unique

inventions that reduce dependence on existing methods and systems,
sometimes rendering them obsolete. Smartphones and their apps, for
example, have revolutionized work and play across the globe.

Entrepreneurs invest in community projects and help charities and other non-

profit organizations, supporting causes beyond their own. Bill Gates, for
example, has used his considerable wealth for education and public health
initiatives.

Entrepreneurial ecosystems
Research shows that high levels of self-employment can stall economic
development: Entrepreneurship, if not properly regulated, can lead to unfair
market practices and corruption, and too many entrepreneurs can create
income inequalities in society. Overall, though, entrepreneurship is a critical
driver of innovation and economic growth. Therefore, fostering
entrepreneurship is an important part of the economic growth strategies of
many local and national governments around the world.

To this end, governments commonly assist in the development of

entrepreneurial ecosystems, which may include entrepreneurs themselves,
government-sponsored assistance programs, and venture capitalists. They
may also include non-government organizations, such as entrepreneurs'
associations, business incubators, and education programs.

California's Silicon Valley is often cited as an example of a well-functioning

entrepreneurial ecosystem. The region has a well-developed venture capital
base, a large pool of well-educated talent, especially in technical fields, and a
wide range of government and non-government programs fostering new
ventures and providing information and support to entrepreneurs.

Questions for Entrepreneurs

Embarking on the entrepreneurial career path to “being your own boss” is
exciting. But along with all your research, make sure to do your homework
about yourself and your situation.
A few questions to ask yourself:

 Do I have the personality, temperament, and mindset of taking on the

world on my own terms?
 Do I have the required resources to devote all my time to my venture?
 Do I have an exit plan ready with a clearly defined timeline in case my
venture does not work?
 Do I have a concrete plan for the next "x" number of months or will I
face challenges midway due to family, financial, or other commitments?
Do I have a mitigation plan for those challenges?
 Do I have the required network to seek help and advice as needed?
 Have I identified and built bridges with experienced mentors to learn
from their expertise?
 Have I prepared the rough draft of a complete risk assessment,
including dependencies on external factors?
 Have I realistically assessed the potential of my offering and how it will
figure in the existing market?
 If my offering is going to replace an existing product in the market, how
will my competitors react?
 To keep my offering secure, will it make sense to get a patent? Do I
have the capacity to wait until I receive it?
 Have I identified my target customer base for the initial phase? Do I
have scalability plans ready for larger markets?
 Have I identified sales and distribution channels?

Questions that delve into external factors:

 Does my entrepreneurial venture meet local regulations and laws? If

not feasible locally, can I and should I relocate to another region?
 How long does it take to get the necessary license or permissions from
concerned authorities? Can I survive that long?
 Do I have a plan for getting the necessary resources and skilled
employees, and have I made cost considerations for the same?
 What are the tentative timelines for bringing the first prototype to
market or for services to be operational?
 Who are my primary customers?
 Who are the funding sources I may need to approach to make this big?
Is my venture good enough to convince potential stakeholders?
 What technical infrastructure do I need?
 Once the business is established, will I have sufficient funds to get
resources and take it to the next level? Will other big firms copy my
model and kill my operation?
What Does It Mean to Be an Entrepreneur?
An entrepreneur is an individual who starts their own business based on an
idea they have or a product they have created while assuming most of the
risks and reaping most of the rewards of the business.

What Is the Best Definition of Entrepreneurship?

Entrepreneurship is the process of setting up a business, taking it from an
idea to realization.

What Are the Four Types of Entrepreneurs?

Four types of entrepreneurs include builders, opportunists, innovators, and
specialists.

What Are the Seven Characteristics of Entrepreneurs?

Seven primary characteristics among entrepreneurs include versatility,
resilience, flexibility, money-savviness, business smarts, focus, and having
strong communication skills.

The Bottom Line

An entrepreneur is an individual who takes an idea or product and creates a
business, a process known as entrepreneurship. Creating a business
requires a lot of work and dedication, which not everyone is cut out
for. Entrepreneurs are often young, highly motivated risk-takers who have a
vision and often sacrifice a lot to achieve that vision.

Entrepreneurs enter the market because they love what they do, believe their
product will have a positive impact, and hope to make profits from their
efforts. The steps entrepreneurs take fuel the economy; they create
businesses that employ people and make products and services that
consumers buy today.

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